Wednesday, November 22, 2006

OTTAWA -- A Canadian businessperson who paid his taxes several days before they were due was slapped with a hefty $287,000 penalty because he remitted the cheque to a tax office instead of a bank.

Documents obtained by Sun Media show the Canada Revenue Agency punished the taxpayer with a 10 per cent fine and warned him to pay up immediately or face potential "legal action being taken without further notice."

"Since our records indicate that your payment of $2,870,400.00 was direct remitted, you have been assessed the penalty for failure to remit at a financial institution in the amount indicated," reads the notice of assessment.

The payment was stamped "delivered by hand" to the Tax Services Office and the cheque deposited to the Receiver General of Canada.

[..] CRA spokesperson Jacqueline Couture said the Income Tax Act rule requiring businesses to make source deduction payments at financial institutions has been on the books since the early 1990s, but enforcement and a mandatory 10 per cent fine only began last month.

From what I can understand, the initial changes were made to make the gathering of the spoils more "efficient" and "cost-effective", although until now the Government didn't take advantage of the opportunity to fine taxpayers for non-compliance. This is totally disgusting. Why wasn't this man informed by the tax office when he remitted his payment? According to Couture, a letter was sent out to businesses back in March informing them of the law which has only been enforced for a month, and apparently not known about by bureaucrats working in the tax office, but no grace period for this guy who dutifully paid his taxes early.

Sad thing is, it is the law down here for U.S. corporate filers. All corporate filers must either make their tax payments at a bank, or mandatory electronic transfers if over a certain size (I think it's a $1,000,000 but I haven't had any tax client with those kind of bills).